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GKN rejects Melrose takeover bid
Posted on Friday, 12 January 2018 12:56
British firm GKN has rejected a takeover offer from private equity investor Melrose that valued the engineer at about GBP 6.96 billion.
At GBP 4.05 per share, the offer represented a bid premium of 21.6 per cent on GBP 3.33, the aerospace parts manufacturer’s closing price on 11th January 2018, the last trading day prior to the announcement.
The suitor submitted the unsolicited proposal, under the terms of which it would pay GBP 0.81 and issue 1.49 new securities for each GKN share, on 8th January 2018.
However, the target’s board, along with advisors Gleacher Shacklock, JP Morgan Cazenove and UBS, have declined the “opportunistic” offer, believing that its terms “fundamentally undervalue the company”.
Melrose must now decide whether to announce a firm intention to make an offer before the deadline of 17:00 on 9th February.
GKN, which employs 58,000 people in 30 countries, has also laid out its plans to split its aerospace and automotive businesses into two separate entities.
It reported profit of GBP 244.00 million on revenue of GBP 8.82 billion for 2016, up from GBP 202.00 million and GBP 7.23 billion, respectively, in 2015.
However, the engineering company announced last October that its third quarter trading margin was lower than the previous year and so projected lower annual profits for 2017.
The decline can be attributed to operational challenges in its North American aerospace division, along with two unexpected claims, potentially costing GKN GBP 40.00 million.
Melrose invests in manufacturing and industrial firms and has been listed on London’s AIM market since its GBP 13.00 million initial public offering in 2003.
For the six months ending 30th June 2017, it posted profit before tax of GBP 131.10 million on revenue of GBP 1.09 billion.
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